Republic stock plunges on possible flight disruptions

DALLAS - Republic Airways (RJET) warned that its operation of regional flights for the nation's biggest airlines could be disrupted by a pilot shortage and labor standoff.

Shortly before the close of trading on Monday, its shares were down 56 percent to $$3.73.

Republic disclosed late Friday that it had cut flying by 4 percent in early summer and was talking with American (AAL), United (UAL), Delta (DAL) and US Airways about reducing its flying more through the first half of next year.

At American Airlines, which also owns US Airways, spokesman Casey Norton said the airlines use 10 regional carriers and were working with Republic on "minor schedule adjustments" to reduce impact on passengers.

United and Delta did not immediately comment on how Republic's problems might affect their regional operations.

Republic expects continued disruptions of flights because of a pilot shortage that it blames on federal rules that raised training requirements for new pilots and increased crew-rest hours.

The company's negotiations with the Teamsters, which represents its 2,100 pilots, are at a standoff despite the use of a federal mediator. Republic said it had offered higher pay than other regional carriers and accused the Teamsters of making unreasonable demands that made it impossible for the company to predict when it might settle the dispute. Pilots voted down a company offer last year.

A Teamsters union spokesman said talks were scheduled to resume next week. He declined further comment.

The Indianapolis carrier said Friday that second-quarter earnings would be between $4 million and $5 million, or eight to 10 cents per share. Analysts had expected 20 cents per share, according to a FactSet survey. The company rescinded all of its previous financial forecasts and hired Seabury Group for advice on strategic options.

Helane Becker, an analyst for Cowen and Co., said that without a pilot deal, "employee unrest" will continue to grow and reliability of service will suffer. She said that without a contract, the company will shrink.

The company operates Republic Airlines and Shuttle America, which operate regional flights using smaller aircraft for American Eagle, United Express, Delta Connection and US Airways Express. The big airlines also hire other regionals for the same work, including company-owned subsidiaries at American.

Regional carriers operate about half the nation's domestic flights, linking many small and mid-sized airports with the hubs run by the big airlines.

Several regional carriers have complained about a pilot shortage since the Federal Aviation Administration raised training requirements for new hires. Pilot unions say the regional airlines could end the shortage by increasing pay, which starts at less than $25,000 at some carriers.

In recent months, Republic has offered pilots extra pay for flying on their days off and extended bonuses for new hires. The Teamsters sued this month, charging that the company's move to boost pay outside of the negotiations process violated federal law.

In afternoon trading Monday, shares of Republic Airways Holdings Inc. fell $4.48, or 52.7 percent, to $4.02.